ML20245E796
| ML20245E796 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 04/21/1989 |
| From: | Jonas S MASSACHUSETTS, COMMONWEALTH OF |
| To: | NRC ATOMIC SAFETY & LICENSING APPEAL PANEL (ASLAP) |
| References | |
| CON-#289-8505 LBP-89-10, OL, NUDOCS 8905020134 | |
| Download: ML20245E796 (14) | |
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!4 COCKEIED viw C UNITED STATES.OF AMERICA
,09 rFR 24 P3 :47 NUCLEAR REGULATORY COMMISSION ATOMIC SAFETY AND LICENSING APPEAL BOARD:
2 Before the Administrative Judges:
Alan S. Rosenthal, Chairman Thomas S. Moore Howard A. Wilber
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In the Matter of
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Docket Nos. 50-443-OL
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50-444-OL PUBLIC SERVICE COMPANY
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(Off-Site EP)
OF NEW HAMPSHIRE, EI AL.
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(Seabrook Station, Units 1 and 2)
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April 21, 1989
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BRIEF OF THE MASSACHUSETTS ATTORNEY GENERAL IN SUPPORT OF HIS APPEAL OF THE DENIAL OF HIS PETITION FOR A WAIVER OF THE FINANCIAL QUALIFICATION RULES FOR FULL POWER OPERATION (LBP-89-10)
INTRODUCTION On February 1, 1989, the Massachusetts Attorney General
(" Mass AG"), pursuant to 10 C.F.R.
$2.758, filed with the Licensing Board a petition for a waiver of the rule exempting the Seabrook Applicants from the requirement that they demonstrate their financial qualification to operate Seabrook at full power.
On March 8, 1989 the lower Board issued 4
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. LBP-89-10 denying the' Mass AG's petition.1#
Notice of Appeal was filed on March 22, 1989.2#
ARGUMENT THE PETITION MADE OUT A PRIMA FACIE CASE FOR WAIVER The Commission in CLI-88-10 at 28 defined "special circumstances" as required by a waiver petition as one or more facts, not common to a large class of applicants or facilities, that were not considered either explicitly or by necessary implication in the proceeding leading to the rule sought to be waived.
Further, the Commission indicated that these circumstances must be such that they " undercut the rationale for the rule sought to-be waived."
Id.
Finally, the Commission stated that these special circumstances must present a "significant safety problem."
Id. The Mass AG's petition meets this 3-pronged test for a crima facie showing sufficient to justify a rule waiver. A' 1/
The Board also denied SAPL's motion to admit a late-filed cont.ention raising similar issues concerning the Applicants' financial qualification for a full-power license.
On April 13, 1989, SAPL filed its brief on appeal of LBP-89-10.
The Mass AG in order to avoid repetition adopts the arguments set forth in SAPL's April 13 filing as support for his appeal of the denial of his petition.
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Although dated March 8, 1989, LBP-89-10 was served by first-class mail on March 9.
Thus, the Mass AG had until March 24, 1989 to notice his appeal.
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CLI-88-10 is the " law of the case" for the proposition that the bankruptcy of PSNH is a "special circumstance" for purposes of the waiver.
Id. at 29.
Moreover, the Commission decided that safety shortcuts'at full power present a "significant safety problem."
Id..at 32-33.
Therefore, the only question for the Board is whether the special circumstances of PSNH's bankruptcy and the fate of its Seabrook share " undercut the rationale for the rule." h
,e The. rule the Mass AG seeks to have waived is itself an exemption from a requirement.that a licensee demonstrate'.its financial qualifications' prior to the issuance of an operating license.
10 C.F.R. 50.33(f) and 50.47(a)(4).
Thus, logically, if the rationale for the rule -- exempting certain utilities from this demonstration -- is undercut by the circumstances of this case, then the Applicants here have the burden of demonstrating their financial qualification for full-power operation.
Put another way:
the Mass AG does'nat have to-demonstrate, in his petition, that the Applicants are not financially qualified.
Instead, his prima facie case need only establish that the rationale for exempting the Applicants from the burden of demonstrating their financial qualification is Lundercut by continuing to exempt the Applicants notwithstanding their financial circumstances.
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The rationale for exempting the Applicants from this burden ~
is that they are electric utilities whose rates for power will be set at such a level that sufficient revenues for safe operation are assured.
As the Commission stated in its 1984 rulemaking:
case-by-case review of financial qualifications for all electric utilities at the operating license stage is unnecessary due to the ability of such utilities to recover, to a sufficient degree, all or a portion of the costs of construction and sufficient costs of safe operation through the rate making process. _
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49 Fed. Reg. 35,747; 35,748 (1984).
The petition at issue established that this rationale is nat applicable to the Seabrook Applicants in light of their financial circumstances for two distinct reasons.
First,cas'the petition makes clear, there is considerable uncertainty as to who or what will own the pSNH share of the Seabrook project.
Thus, there is no basis for assuming that the future owner (s) will be assured of recovery of "all or a portion of costs of construction and sufficient costs
<,f safe operation through the ratemaking process."
At present., there is no reasonable assurance that a "ratemaking process" will even exist for at least PSNH's 35% share of the project.A' Second, the rationale for the exemption for utilities should not be narrowed or limited to the proposition that operating expenses will be recovered in rates.
The portion of the rulemaking quoted above cites both the costs of 1
construction as well as the costs of safe operation as recovered in rates.
Obviously, it is the financial stability a
and overall financial well-being of the licensee that is at A/
The lower Board in an ipse dixit simply held that the future owners "whoever they may be" will recover costs of safe operation prudently incurred.
LBp-89-10 at 12.
Nothing supports this finding except a purported Commission presumption that it is the case.
Moreover, the lower Board erroneously held that the Mass AG had to show, as part of its prima facie case, that these future owners will not be allowed such recovery.
Id.
In fact, as discussed above, the Mass AG's required pIlma facie showing is only that the assumption that such recovery will be allowed is not warranted without more when the status of these future owners is in doubt. j i
s-I issue.
Focussing on only the recovery of operating expenses, as the lower Board has done, makes nonsense of the very concerns expressed in CLI-88-10 regarding a utility in financial difficulty:
The reason for conducting a financial qualifications review and requiring a finding of financial qualifications is solelv to provide some added assurance that a licensee would not, because of financial difficulties, be under pressure to take some safety shortcuts.
Shortcuts in safety at full power conceivably could avoid shutdowns or derating and thereby contribute to greater plant availability and revenue from power sales.
CLI-88-10 at 32-33.
Thus, it is the overall financial i
stability of a utility whose rates are set that provides the ra'ionale for exempting such utilities from demonstrating their financial qualification.
Correspondingly, the petition made out a prima facie case that there is no assurance that its owners will not have financial incentives to take " shortcuts".
Again, the Mass AG need not prove at this juncture that such shortcuts will be taken.
Instead, the prima facie showing required for a rule waiver is that in light of the "special circumstances" of this case there is no present assurance that the Seabrook owners "whoever they may be" will not have incentives to take shortcuts to increase total revenues.
The following scenario for a financially troubled utility highlights this point.
The utility does indeed recover an appropriate capital cost (expenses plus return) per kilowatt hour through rates.
Because the business is in dire need of _ _ - _ - - - _ _ _
.g additional funds there is an incentive either to reduce actual expenses or to increase kilowatt-hours per measure of expense or both.
In other words the utility will have an incentive
- 1) to lower expenses by curtailing' operating activities or deferring or eliminating maintenance and repair functions;
- 2) to increase the kilowatt hours per measure of costs by avoiding shutdowns or derating; or 3) to do both.
This scenario is entirely realistic for a bankrupt utility, leads to significant safety problems, and exists notwithstanding the full recovery of operating expenses through rates.
In short, the bankruptcy of pSNH, the resultant incentives to cut costs or exceed prudent levels of operation, the uncertainty surrounding who or what will own the PSNH share of Seabrook, and the question of how rates will be set and at what levels such rates might be set all constitute a prima facie showing that the rationale for exempting this utility from a demonstration of its financial qualification for a full-power license is undercut by the special circumstances of this case.E#
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Subsequent to the filing of the Mass AG petition and the decision by the Licensing Board, PSNH issued a proposed Disclosure Statement in support of its Plan of Reorganization.
This statement further supports the Mass AG's orima facia showing by indicating that great uncertainty exists as to the level of rates at which Seabrook power could be set without causing a decline in total revenues due to competition in PSNH's service area.
Sam Attached Exhibit 1 at 38-39.
The disclosure statement also states "In the absence of an agreement with the state on rate increases which are an essential element of a consensual reorganization plan, obtaining significant rate increases even in the event Seabrook operates could be a lengthy and uncertain process." - _ _ _ _ _ - _ _
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CONCLUSION For all of the reasons set forth above, the Licensing Board's' denial of the Mass AG's petition should be reversed and the petition for waiver certified to the Commission.
Respectfully submitted, JAMES M.
SHANNON ATTORNEY GENERAL COMMONWEALTH OF MASSACHUSETTS
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f Stepfie'n M J nas Deputy Att ney General Chief, P lic Protection Bureau John Tra iconte Chief, Nuclear Safety Unit Public Protection Bureau One Ashburton Place, 19th Floor l
Boston, Massachusetts 02108 (617) 727-2200 1
Date:
April 21, 1989 t
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.s EXHIBIT'l L*NITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE'
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Case No. 88-00043 In re
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Chapter 11
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Public Service Company of
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Debtor
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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE'S
[ PROPOSED] DISCLOSURE STATEMENT THIS DOCUMENT HAS NOT YET BEEN APPROVED BY THE BANKRUPTCY COURT AND IT MAY BE AMENDED FROM TIME TO TIME UNTIL THE ENTRY OF THE BANKRUPTCY COURT'S ORDER APPROVING IT.
NO PERSON SHOULD RELY ON THIS DISCLOSURE STATEMENT IN DECIDING HOW TO V0TE ON THE PLAN UNTIL SUCH ORDER HAS BEEN ENTERED.
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oparating costs during th2 term of the NHEC Buyback Contract.
Because the capacity and energy price reflecting NHEC's " full cost" substantially exceeds the projected market price for Seabrook generated power, the NHEC Buyback Contract is priced well above market.
d.
VELCO Merrimack Contract On July 16, 1966, Public Service and Vermont Electric Power Company, Inc.
("VELC0") entered into the " Contract for Sale and Purchase of Power from Merrimack Unit No. II" (the "VELCO Merrimack Contract"). The VELCO Merrimack i
Contract permits VELCO to purchase from Public Service, and requires Public Service to sell to VELCO, 100 megavatts of capacity and energy corresponding thereto from Unit No. II of Merrimack Station in Bov, New Hampshire, during each year of the 30-year agreement. The price to VELCO for capacity and energy under the VELCO Merrimack Contract is based upon the " imbedded cost" of Merrimack Unit No. II.
Because Merrimack Unit No. II is twenty years old, the
" imbedded cost" of the plant is very lov, making the VELCO Merrimack Contract belov market.
In 1988, Public Service sold 100 megawatts to VELCO pursuant to the VELCO Merrimack Contract at the price of approximately $85 per kilowatt year plus related fuel costs.
Public Service estimates that the fair value per kilowatt year that it vill sell to VELCO in 1989 is between S150-$170 per kilowatt year plus related fuel costs.
3.
Major Assets a.
Seabrook Nuclear Plant Public Service is the principal owner of Seabrook, a recently completed but not yet operating nuclear-fueled steam-electric generating plant at a site located in Seabrook, New Hampshire, having a Westinghouse pressurized water.
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reactor with a rated capacity of 1,150 megavatts, utilizing ocean vater for condenser cooling purposes.
Seabrook vas originally designed to be a 2-unit j
facility. Construction of Seabrook vas completed-in the fall of 1986;. Unit 2
has been cancelled.
Responsibility for construction and pre-operational maintenance of Seabrook has since 1984 been vested in a division of Public Service known as the New Hampshire Yankee Division.
Public Service and th'e Joint Owners have i
long intended to reconstitute the New Hampshire Yankee Division as an independent corporate entity, to be known as New Hampshire Yankee Electric Corporation ("NHYEC").
The Joint Owners vould own the new corporation and be represented on its governing board in proportion to their ownership of Seabrook. 'The existing agreement between Public Service, as agent I
for the Joint Owners, and Yankee Atomic Electric Company ("YAEC") for the provision by YAEC of engineering, quality assurance, and other services for Seabrook would then be administered by NHYEC.
It is contemplated that at some future time,
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subject to NRC approval, NHYEC is to be given responsibility for the operation and maintenance of Seabrook.
The reconstitution of the New Han.pshire Yankee Division into NHYEC is expected to result in more efficient operations and an improved NRC licensing posture. The reconstitution has no effect, however, on the Plan or other restructuring alternatives available to Public Service.
1 Theoretically when Seabrook becomes operational Public Service would be entitled under traditional ratemaking principles to very large rate increases; in practice, competition in Public Service's service area from other sources I
of power supply effectively limits such rate increases.
See Section II.B.4 below.
In the absence of an agreement with the State on rate increases which are an essential element of a consensual reorganization plan, obtaining 1
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significant rate increases even in the event Seabrook operates could be a lengthy and uncertain process.
(i)' Operating License i
The process of obtaining approvals and permits for Seabrook has been long, complex, consistently opposed by a number of intervening groups and plagued by lengthy delays. These factors have resulted in greatly increased costs for Seabrook. Continued opposition by intervenor groups at the regulatory level and through court appeals is virtually certain. A 40-year operating license for Unit 1 has been granted by the NRC subject to certain conditions.
Among those conditions are completion of fuel loading and zero power testing (both nov done), successful low power testing, and NRC approval of radiological emergency response plans for certain New Hampshire and Massachusetts towns and cities within a ten-mile radiur of the Seabrook Plant, Low Power: In December 1986 the NRC voted unanimously to authorize low power testing for Seabrook pending satisfaction of the NRC's requirement that funds be available to decommission Seabrook if full power authorization is not granted. On March 20, 1989 the Joint Ovners filed with the NRC staff a 1
funding plan which they believe vill satisfy the NRC's requirement.
It is h
anticipated that shortly after review and determination by the NRC Staff that this funding plan meets the NRC's requirements, authorization to proceed with low power testing vill be issued. Any such authorization vill be subject to a 10-day automatic stay to give interveners an opportunity to appeal. As a result, low power testing is not expected to begin earlier than mid-April.
On March 9, 1989 the Governor of New Hampshire announced that he intended to seek, in the Bankruptcy Court, an injunction prohibiting Public Service from commencing low power testing unless the State and Public Service reach a I
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L DL Xi ii.i UNITED STATES OF AMERICA
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NUCLEAR REGULATORY COMMISSION ATOMIC SAFETY AND LICENSING APPEAL BOARD
~29 APR 24 P3 :47
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hhhi i E.. ' IN In the Matter of
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Docket Nos. 50-443-OL 4RMKh
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50-444-OL PUBLIC SERVICE COMPANY
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OF NEW HAMPSHIRE, EI AL.
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(Seabrook Station, Units 1 and 2)
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April 21, 1989
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CERTIFICATE OF SERVICE I,
Stephen A. Jonas,' hereby certify that on April 21, 1989, I made service of the within Brief Of The Massachusetts Attorney General In Support Of His Appeal Of The Denial Of His Petition For A Waiver Of The Financial Qualification Rules For Full Power Operation (LBP-89-10) to:
Ivan W.
Smith, Chairman Kenneth A. McCollom Atomic Safety & Licensing Board 1107 W, Knapp St.
U.S. Nuclear Regulatory Commission Stillwater, OK 74075 East West Towers Building 4350 East West Highway Bethesda, MD 20814 Dr. Richard F. Cole Robert R.
Pierce, Esq.
Atomic Safety & Licensing Board Atomic Safety & Licensing Board
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U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission East West Towers Building East West Towers Building 4350 East West Highway 4350 East West Highway Bethesda, MD 20814 Bethesda, MD 20814 Docketing and Service Thomas G. Dignan, Jr.
U.S. Nuclear Regulatory Commission Ropes & Gray Washington, DC 20555 One International Place Boston, MA 02110 Sherwin E.
Turk, Esq.
U.S. Nuclear Regulatory Commission Office of the General Counsel 11555 Rockville Pike, 15th Floor Rockville, MD 20852
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U
, i H. Joseph Flynn, Esq..
Atomic Safety & Licensing Assistant General Counsel.
Appeal Board Office of General Counsel U.S. Nuclear Regulatory Commission-Federal Emergency Management Washington, DC 20555 Agency 500 C Street, S.W.
Washington, DC 20472.
Robert A.
Backus,-Esq.
Atomic Safety & Licensing Board Backus, Meyer & Solomon U.S. Nuclear Regulatory Commission 116 Lowell Street Washington, DC 20555 P.O.
Box 516 Manchester, NH 03106 Jane Doughty Dianne Curran, Esq.
Seacoast Anti-Pollution League Harmon, Curran & Towsley Five Market Street Suite 430 Portsmouth, NH OT801 2001 S Street, N.W.
Washington, DC 20008 Barbara St. Andre, Esq.
Judith Mizner, Esq.
Kopelman & Paige, P.C.
79 State Street 77 Franklin Street Second Floor Bostcn, MA 02110 Newburyport, MA 01950 Charles P. Graham, Esq.
R.
Scott Hill-Whilton, Esq.
Murphy & Graham Lagoulis, Hill-Whilton & Rotondi 33 Low Street 79 State Street j
Newburyport, MA 01950 Newburyport, MA 01950 Ashod N.'Amirian, Esq.
Senator Gordon J. Humphrey 145 South Main Street U.S.. Senate P.O.
Box 38 Washington, DC 20510 Bradford, MA 01835 (Attn:
Tom Burack)
Senator Gordon J. Humphrey George Dana Bisbee, Esq.
One Eagle Square, Suite 507 Assistant Attorney General Concord, NH 03301 Office of the Attorney General (Attn:
Herb Boynton) 25 Capitol Street Concord, NH 03301 Phillip Ahrens, Esq.
William S. Lord Assistant Attorney General Board of Selectmen Department of the Attorne; General Town Hall - Friend Street Augusta, ME 04333 Amesbury, MA 01913,
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Alan S. Rosenthal, Chairman Thomas S. Moore Atomic Safety & Licensing Atomic Safety & Licensing Appeal Board Appeal Board U.S. Nuclear Regulatory Commission U.S.
Nuclear Regulatory Commission Washington, DC 10555 Washington, DC 10555 Howard A. Wilber Atomic Safety & Licensing Appeal Board U.S. Nuclear Regulatory Commission Washington, DC 10555 Respectfully submitted, JAMES M.
SHANNON 1
ATTORNEY GENERAL
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Ster $ hen gJonas t-Deputy Attorney General Chief, Public Protection Bureau One Ashburton Place Boston, MA 02108 (617) 727-2200 1
Dated:
April 21, 1989 _
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l Alan S.
Rosenthal, Chairman Thomas S. Moore Atomic Safety & Licensing Atomic Safety & Licensing Appeal Board Appeal Board U.S.
Nuclear Regulatory Commission U.S.
Nuclear Regulatory Commission Washington, DC 10555 Washington, DC 10555 Howard A. Wilber l
Atomic Safety & Licensing Appeal Board U.S.
Nuclear Regulatory Commission Washington, DC 10555 l:
Respectfully submitted, JAMES M.
SHANNON ATTORNEY GENERAL
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St&6 hen )('Jonas Deputy Attorney General Chief, Public Protection Bureau One Ashburton Place Boston, MA 02108 (617) 727-2200 Dated:
April 21, 1989... - - - - -..,,, - - -...